JP Morgan "BoK to keep year-end base rate at 2.5%... Expected to reach 2.75% in January next year"

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Global investment bank (IB) JP Morgan forecasted that the Bank of Korea will raise interest rates four more times this year, including in May, bringing the year-end base rate to 2.5%.

In a report published on the 4th, Park Seok-gil, head of JP Morgan's Financial Market Operations Department, predicted, "The Bank of Korea will raise the base rate by 0.25 percentage points at the meetings in May, July, August, and October, raising the year-end base rate to 2.50%, and will raise it further in January next year to reach 2.75%."

JP Morgan raised its year-end base rate and first-quarter base rate forecasts by 0.5 percentage points each compared to previous estimates.

Park said, "The minutes of the April Monetary Policy Committee meeting released the day before were more hawkish than expected," and explained, "In the minutes, the committee members expressed concerns about the 'second-round effects,' where actual inflation and inflation expectations interact to further increase prices."

He added, "Considering the April inflation rate (4.8%) and the proactive intention to raise rates, it suggests that the base rate could be raised by 0.25 percentage points at the May meeting as well," and said, "Although there are changes such as the inauguration of Governor Lee Chang-yong and the retirement of Monetary Policy Committee member Lim Ji-won, the policy direction emphasizing data by Governor Lee will continue."

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